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Social Security recipients at the lower end of the income scale receive a higher benefit as a percentage of their contributions than those who had higher wage incomes. Wages greater than the annual maximum subject to SS taxes (currently $160,200), do not receive any credits for earnings above that ceiling, so that excess income will not result in a higher SS retirement benefit for those high wage-earners.
Medicare premiums are subject to IRMAA for those with high incomes, even after retirement.
My offer still stands. Anyone who has a high monthly SS payment and all the accompanying problems are welcome to switch with me. You may have my low SS payments and all the "freebies" I supposedly get.
Funny thing is, no one ever wants to take me up on my offer. So getting a higher SS payment because of receiving higher wages must not be the most awful thing in the world.
Social Security recipients at the lower end of the income scale receive a higher benefit as a percentage of their contributions than those who had higher wage incomes. Wages greater than the annual maximum subject to SS taxes (currently $160,200), do not receive any credits for earnings above that ceiling, so that excess income will not result in a higher SS retirement benefit for those high wage-earners.
Medicare premiums are subject to IRMAA for those with high incomes, even after retirement.
In addition to IRMAA, for earned income, not only was the income cap removed but high income earners pay an additional 0.9% into Medicare:
$250,000 for married filing jointly;
$125,000 for married filing separately; and
$200,000 for all other taxpayers.
Although I never earned enough to be subject to the additional 0.9%, I do pay IRMAA Part B & Part D surcharges.
The OP said money paid into Social Security had already been taxed, implying double taxation.
The reality is for most people there is NO double taxation because 50% of their benefit is excluded from the calculation, which coincidentally happens to be identical to the 50% contributed by the employer which had never been taxed.
That was the entire point of my response.
Failure to index the thresholds to inflation may result in more people paying taxes on their benefits today, but most have not been taxed previously on 50% of the monies providing that benefit.
Then the OP was wrong or you misunderstood. Money going into SS has not been taxed - it is withdrawn pre tax and the money received from SS is only related to what is paid into SS, some get more but some get less than nthey put in.
Neither employee nor employer portions are taxed prior and what recieved is not the same as what is paid - FICA is taken out of gross pay, income tax is paid on net pay - after FICA is removed. There is NO "double taxation" if taxed when received.
So your entire premise is wrong - for many people (not most) - more than 50% currently pay tax on SS. Your idea of excluded because of where it comes from is wrong - if you go back to 1983 when 50% was added, there was no discussion of because it was employer part or anything of the like and it is not really the employer portion anyway. Also, if someone is self employed like a contractor, they pay both portions so employee is paying 100% (and still not taxed).
Indexing has nothing to do with whether taxed or not - 100% of the money has not been taxed previously and much is not taxed when received. No one s double taxed on SS and many are not taxed at all - the tax on SS also rolls back into the system. SS was meant as a safety net, not as a tax mechanism.
It's past my bedtime, so I'll make one quick note and come back tomorrow to read Ariadne22's response. Self-employed taxpayers deduct the employer's share of FICA from their adjusted gross income. Duh.
Of course they do - stupid to not do so - my point was all of it (employer and employee portions) are deducted before taxes. Duh.
They are arguing that it IS taxed and some is double taxed that is why the 50% to prevent double tax on a portion - very wrong.
My offer still stands. Anyone who has a high monthly SS payment and all the accompanying problems are welcome to switch with me. You may have my low SS payments and all the "freebies" I supposedly get.
Funny thing is, no one ever wants to take me up on my offer. So getting a higher SS payment because of receiving higher wages must not be the most awful thing in the world.
The argument is that people should get what they earned in benefits without the threat of taking them away because a few want the program to be an equality program instead of an insurance program.
If you had an insurance policy, would you accept the reduced benefits of someone who paid for less benefits or would you want what you paid for and were promised? I am guessing you would not want less than you paid for.
Of course they do - stupid to not do so - my point was all of it (employer and employee portions) are deducted before taxes. Duh.
They are arguing that it IS taxed and some is double taxed that is why the 50% to prevent double tax on a portion - very wrong.
OMG. You still don't get it.
Regardless, go back and read the historical documents. The program was deliberately designed as a Social (welfare) Insurance program with the aim to preventdestitution among the aged and disabled. Those who earned a higher income would essentially pay more for the costs of the program. Sorry to burst everyone's bubble.
We really have no promise of any amount ….just like any insurance the terms can change along with the premiums paid changing
True, but with other types of insurance, participation is not mandatory, and you have the option of switching companies or plans if the terms or premiums change.
The below is a link to a recent article addressing Social Security. Steve Goss, Chief Actuary of Social Security, briefly discusses the program. I have been following him for years, via the SSA website and C-Span, mostly because he is knowledgeable, but also because he retains the ability to respectfully respond to dimwits without blinking an eye. Several years ago, I also learned from him that a potential "... percent cut across the board" does not necessarily mean that all beneficiaries would receive the same percentage of a cut.
Then the OP was wrong or you misunderstood. Money going into SS has not been taxed - it is withdrawn pre tax and the money received from SS is only related to what is paid into SS, some get more but some get less than nthey put in.
Neither employee nor employer portions are taxed prior and what recieved is not the same as what is paid - FICA is taken out of gross pay, income tax is paid on net pay - after FICA is removed. There is NO "double taxation" if taxed when received.
This is grossly incorrect.
Of course, you pay taxes on income BEFORE THE FICA DEDUCTION.
FICA taxes do not reduce your taxable income also known as AGI - adjusted gross taxable income:
Quote:
FICA tax is a deduction from your wages but does not affect how much you earn and therefore has no effect on AGI.
LOOK at your W-2. Taxable income may reflect deductions for contributions to a 401k or HSA or some other form of tax sheltered vehicle, but FICA is NOT one of them.
So, yes, there can be double taxation on 35% of the SS benefit for some. And, yes, people have paid income taxes on monies they contributed. Employers have not.
Last edited by Ariadne22; 02-08-2023 at 01:15 PM..
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